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Home News Netki Extends TransactID Solution For FATF “Travel Rule” Compliance

Netki Extends TransactID Solution For FATF “Travel Rule” Compliance


In order to address new regulatory guidance from FATF, FINMA and FinCEN, which requires Money Services Businesses, trading cryptocurrencies, to comply with the “Travel Rule.” Netki has updated its TransactID solution.

“With the increasing regulatory pressure being placed on cryptocurrency services, we’ve developed a way to maintain compliance without disrupting the business,” said Justin Newton, CEO and co-founder of Netki, “It’s a comprehensive solution that doesn’t require a huge investment, and adds zero transaction costs.”

Netki’s TransactID, launched in 2016, uses open-source standards to enable a secure, encrypted, peer-to-peer exchange of identity information between parties prior to transactions.  This allows Virtual Asset Providers (VASPs) to capture and transfer the information required by the “Travel Rule,” and stay in compliance with FATF.

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In June, the FATF’s guidance made it clear that businesses managing cryptocurrency would have to gather, hold, and transfer information about the identity of the originator and beneficiary involved in any transaction.  Recently, the US FinCEN agency has begun enforcement actions against VASPs who are not in compliance.  In addition, FINMA, the regulatory agency of Switzerland, last week issued even more stringent guidelines than FATF, extending Travel Rule requirements to include transactions with unregulated wallets.

As a result, VASPs are searching for solutions to achieve compliance quickly.  Those that fail to do so may incur significant fines or be pushed out of G20 nations, which have affirmed their intention to hold to FATF guidelines. 

Netki’s TransactID solution uses a secure, private, encrypted connection to allow VASPs and their clients to exchange the information required by FATF, maintaining the privacy of individuals’ identities and the integrity of the blockchains on which the transactions take place. 

“VASPs are concerned, and rightly so, that FATF regulations threaten the very principles of privacy and distributed ledgers on which cryptocurrencies are founded.  TransactID enables them to comply with regulatory disclosure requirements without interfering with the blockchains or threatening the fungibility of their underlying tokens,” said Newton.

TransactID uses X.509 certificates to exchange ID information between transacting parties and their VASPs.  It’s a standard that is widely recognized by global governmental and regulatory agencies as a legally valid form of identification.  Netki’s solution can be customized to include whichever pieces of identity information each VASP chooses to store and exchange, as determined by its compliance policies. TransactID also doesn’t require VASPs to establish a trust relationship in advance of the transaction, since it uses the certificates to validate identity.

Netki’s solution builds on the Bitcoin Improvement Protocol, BIP 75, which was developed in 2016.  BIP 75 is a peer-to-peer protocol, based on open standards, which is available for anyone to use and is compatible with both custodial and non-custodial wallets.   

“We wanted to establish a set of standards for exchanging ID information that could be used by any organization or software developer so that we could avoid creating closed-loop systems in the future.  We don’t want a situation where one central resource controls access to technology, as is the case with many technologies like SWIFT and ACH in the global banking system.  It’s a standard that VASPs can coalesce around that also works for banks, fintech, and non-custodial wallets, which is particularly important given FINMA’s new guidance.  Any solution that doesn’t work for all of them is a non-starter.” 

Netki used BIP 75 as the foundation for its TransactID product, which was selected for MAS, the financial regulatory agency of Singapore, in a study completed in 2017.  TransactID has been successfully tested and used for transactions by Commercial Banks and has also been incorporated into Central Bank digital currency platform designs.  It’s the only peer-to-peer compliance solution for VASPs that’s been in production since 2016.   

TransactID was developed with an eye to the future so that it’s easily extensible if additional regulatory requirements, such as OFAC/Sanctions, are later imposed on VASPS.  “In all likelihood, the Travel Rule is just the first regulation that they will encounter.  Sanctions and OFAC compliance will follow in the future, and our product can easily accommodate it,” said Newton.

To learn more about TransactID, download the Product Sheet here.

Founded in 2014 by internet innovation veterans Justin Newton and Dawn NewtonLos Angeles-based Netki is the only KYC-AML compliance technology provider developing remote identity verification solutions purpose-built for the blockchain era. Its flagship KYC and AML solution, OnboardID has licensed validations for over 750,000 identity documents. Netki’s scalable, flexible, automated technology increases trust in regulated transactions on the parts of sellers, buyers and regulators. 

Their products are included in the IBM blockchain ecosystem, Microsoft Azure Blockchain as a Service, PwC Australia’s Digital Asset Services and the Bitt’s Central Bank Digital Currency platform and mMoney mobile wallet.

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